Most Company Managers Overwhelming Feel That

question 45

Multiple Choice

Most company managers overwhelming feel that:

• A)dividends should be increased annually no matter what.
• B)dividends should be flexible and adjusted annually in response to changes in the firm's earnings.
• C)the personal taxes of their shareholders must be their primary consideration when setting dividend policy.
• D)once a dividend is increased, it should not be decreased.
• E)dividend smoothing is talked about but rarely affects dividend decisions.

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Definitions:

Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the company's assets and earnings.

In The Money

A term used to describe an option that has intrinsic value; for a call option, it means the underlying price is above the strike price.

Option Pricing Theory

A framework used in finance to determine the fair value of an option based on factors such as the stock price, strike price, volatility, time to expiration, and risk-free interest rate.

Acquisitive Firms

Companies that focus on growth through acquisitions, buying other companies to increase their market share, diversify their products, or gain other strategic advantages.